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Why I believe Dual-Drive will be free and we're going to see increased range

Why I believe Dual-Drive will be free and we're going to see increased range

Hey Folks,

I expect Dual Drive to be free and I expect range to increase.

Point 1: Why decrease the Tesla market size by increasing prices or adding complexity via producing multiple drive-trains?

Tesla had been targeting a gross margin of 25% and last quarter they met it. Their current goal is to grow this to 28% by the end of the year. Their ASP is 92K or so, so we're expecting this to be about 2.75k per car they need to tweak out. Remember that they've invested heavily in new technologies (camera system, dual-drive, etc) that are not counted as gross margin but R&D (100M write-down). That said, rumors re: supplies willing to bend backwards for Tesla today means that their seats, lights, steering wheels, etc have all come down in cost. I'd expect the cost savings to easily cover 10% gross margin.

So why give away dual-drive for free? Well, the Tesla Model S runs from 70-120K today. Tesla is more profitable for each increasing production day. The number of people in the market for 70-120K cars is dwindling as they all buy Teslas Model S & Model X. They need to sell every car they make until 2017 when they launch the Model III. Does it make sense to lower the # of potential buyers by raising prices? How can you maintain a healthy backlog over 2 years? By making your product so desirable, it will guarantee you income until your mainstream vehicles are available. Let me put it this way, if Tesla sells 75K AWD Model S between today and Model III unveiling and charges $5K, they will make an extra $0.375B in sales out of $18.2B, or 2%.

The question is, does Elon believe 2% is worth the trouble of maintaining 2 separate drive train production facilities? Tesla is not built like Toyota where each individual drive-train gets a huge benefit for economies of scale. Creating 2 production drive-trains drains the production efficiency. From a $s perspective, it is going to cost Tesla money.

Point 2: Range is going to go up, without increasing the battery!

So dual-motors will give us 2 VFDs. VFDs have an efficiency rating for their frequency range. I'm trying to find this, but I expect that at their max frequency, they are less efficient. I'm trying to find documentation on this. I have been unsuccessful. =( However, from everything I've learned about variable frequency systems, this has always been true. (Electrical Engineer)

Point 3: You go faster with AWD.

Dual-motors also has dual gearing. This means we can expect to see constant torque available across a wider speed. Currently the top-speed is limited by the gearing. Not much else to add.

Point 4: Elon says so.

Elon had said in Vanity Fair *last night* that the internet got it right, but doesn't really understand the scope. I think he's gotten a huge pickup in efficiency and is ready to unleash this on the world with minimal costs. That would blow people away. =)

Sudre_ | 9 octobre 2014

While everything you say would be cool if true..... I don't think they need to drive up demand just yet. I say drive up demand because I imagine a lot of people would trade in their current S for an AWD version that costs about the same as their original purchase.

My statement also supports your statement because Tesla is prepared for an influx in trade ins with their 'Pre-owned' car program.... hmm may have to think more on this.

Pungoteague_Dave | 9 octobre 2014

Nice theory but flawed in every way. Starting with losing the frunk, ending with any possible reduced cost analysis that keeps the standard 60 and 85 in a reasonable price range. BTW, blended ASP is over $102k of last Q.

jordanrichard | 9 octobre 2014

Well, what ever it is. We will find out in an hour and a half.

kwen197 | 9 octobre 2014

I like all your "Points", I believe you have got it "Right".

EmperorTytus | 9 octobre 2014

@PD: The frunk isn't going anywhere. Only losing the microwave-sized space at the bottom rear of the frunk.

TeslaNH25 | 9 octobre 2014

Another point to consider. What about those buyers who don't want AWD, or need AWD? Plus there is added weight for a second motor. Do I really want a 5000 pound vehicle ?
Just food for thought. We will all know the answer in a few hours.

kinsman175 | 9 octobre 2014

TeslaNH25@

Agreed. I can understand people want to let the rear hang when driving around and don't want the complexity or weight. I go back to this ... Imagine the Tesla's Mgmt decision.

If range and top speed are increased at minimal cost but production complexity is increased by maintaining two separate lines ... can I convince customers who DO NOT WANT AWD that Tesla's Dual-Drive is all about range and efficiency?

I think so but we'll know soon!

TeoTeslaFan | 9 octobre 2014

nicksun,

A week ago I had the same idea mostly for the same reasons you mentioned but now I'm not so sure. They might have modified the existing platform to support both motor options.

With P85 and P85+ we knew that Tesla wants to sell a high performance version with better margins. Right now they are production limited. Whether they sell an S85 or P85+ they use the exact same battery. Therefore it makes sense to sell less S85 and more P85 before the Gigafactory is operational. Let's not forget that Tesla is still making a loss.

Dual motor on all Model S would be cool but it would be even cooler if they did a design revision that includes the following:
1. Get rid of the plastic nosecone (Most important problem without a doubt. To me this almost completely ruins the beautiful design of the Model S)
2. Fix the hood crease problem
3. Offer better front seat options with lateral support
4. A 4 seater version for Chinese market with more comfortable rear seats (I just read that it is illegal in China to have 3 children)
5. Optional ACC

Mathew98 | 9 octobre 2014

@Teo - Hmmm. Not quite true. People can pay the children surcharge beyond the first born child in China. It's not illegal.

Why would TM charge $1000 for ambient lighting which costs them 10 bucks in material?

It's the same reason why AWD won't be offered free. It's going be a $5K option so the margin can go up even higher.

sklancha | 10 octobre 2014

I think the final answer is that the D will be a $4g upcharge, but the autopilot features will be with all the vehicles. This is the best of both worlds, IMHO

Mathew98 | 10 octobre 2014

I was pretty darn close though. Perhaps it's time to trade up? Dual motors would be great for the Northeast.